BUSD Peg Buckles Under SEC Pressure – BNB Drops 5%
On Monday, February 13th, Binance USD (BUSD) fell to $0.9950. This drop in value comes amid increased regulatory scrutiny of the digital asset industry following a major market correction and the bankruptcy of the FTX exchange. BUSD, which holds a market capitalization of $16 billion, is the third-largest stablecoin, and seventh-largest crypto by market cap, according to CoinMarketCap. The stablecoin plays a key role in the Binance ecosystem and the wider cryptocurrency sector. The depeg of BUSD has affected the value of Binance Coin (BNB), the native token of Binance’s exchange, which saw a 7.5% drop in price, falling from $312 to $289. The dip in BNB’s value stems from the U.S. Securities and Exchange Commission (SEC) targeting Paxos, Binance’s stablecoin partner, over concerns that BUSD may be considered a security. On the 13th of January, the New York State Department of Financial Services instructed Paxos to stop producing new BUSD. Following the instruction, Binance stated that the cessation of the stablecoin’s production would lead to a decrease in its market capitalization over time. All existing BUSD tokens will remain fully backed and redeemable through Paxos Trust Company until at least February 2024, Paxos said. BUSD’s market capitalization has fallen 1% since Sunday 12th, while the market capitalization of USDT increased to $68.58 billion on February 13th. Circle’s USD Coin (USDC) market capitalization remains unchanged, indicating that conversions are primarily being made in USDT. The SEC’s categorization of BUSD as a security sparked controversy; some have argued that the Howey Test does not apply to stablecoins. The Howey Test is a set of criteria used by the SEC to determine if an asset qualifies as a security and whether it should be regulated as such. The SEC has labelled BUSD as an “unregistered security”, and is suing its issuer, Paxos. According to Adam Cochran, a partner at Cinneamhain Ventures, the Securities and Exchange Commission (SEC) has the authority to sue any company that issues financial assets under the Securities Act of 1933. Cochran’s statement references the recent debate surrounding the SEC’s categorization of BUSD as a security. 1/5 Cochran explains that the Howey Test doesn’t restrict the SEC and that these assets hold underlying Treasuries. This makes them similar to a money market fund, exposing holders to a security, even if they don’t earn from it. The depeg of BUSD and subsequent drop in BNB’s value highlights the increased regulatory scrutiny of the digital asset industry and its potential impact on the stability of stablecoins. The SEC’s categorization of a stablecoin as a security sets a worrying precedent for potential future lawsuits. Read more about the NYDFS investigation with Paxos below: Recent news about Binance is covered in:
Binance USD Depegs, Binance Coin Sees a Drop
BUSD Operations and Cease in Production
In the aftermath, Binance CEO Changpeng “CZ” Zhao has affirmed that users have begun to migrate to other stablecoins. Binance intends to adjust its products, including transitioning from using BUSD as the primary trading pair. Despite these changes, Binance will continue to support BUSD.
Is BUSD a security?
But how on earth is a STABLECOIN considered a security, when it clearly doesn’t meet the Howey Test criteria.
No one has ever had “the expectation of profit” when buying $BUSD. pic.twitter.com/QXOlDUyvc3
This is what people don't realize.
Howey test = precedent for investment contracts.
"Securities" is a much broader category defined by the 1933 Securities Act.
Honestly, if the SEC wants to, with how vague the act is, its fairly easy to put anything under it. https://t.co/TbHKqO3zLDOn the Flipside
Why You Should Care
New York Regulators Launch Investigation into Stablecoin Issuer Paxos
Binance to Cease US Dollar Transfers for Non-US Customers
Read more: https://dailycoin.com/busd-peg-buckles-under-sec-pressure-bnb-drops/
Text source: DailyCoin.com
